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Raghuram Govinda Rajan is an Indian economist who has been appointed as the next
(23rd) Governor of the Reserve Bank of India on 6th of Aug, 2013 for a term of three years
and will take over from Dr. D. Subbarao, whose five year term completes on September 4,
2013.
He formerly served as the president of the American Finance Association and was the chief
economist of the International Monetary Fund (IMF)
Rajan's previous work with the Indian government includes his helmsman ship of a Planning
Commission-appointed committee on financial reforms, and as honorary economic adviser to
Prime Minister Manmohan Singh.
After two governors from Andhra Pradesh, Y. V. Reddy and D. Subbarao, it is the return of a
Tamil Brahmin to the high profile post.
Raghuram G. Rajan was born in 1963 in Bhopal to an IFS officer from a Tamil family. He
was abroad till his 7th year of school, having lived in Sri Lanka, Indonesia, and Belgium, and
in 1974, he moved back to India from Belgium. Then he did the rest of his schooling in
Delhi.
Rajan won the Director's Gold Medal for best all-round achievement at IIT Delhi and was
also a gold medallist at IIM Ahmedabad. He received a PhD in management from the MIT in
1991 for his thesis titled "Essays on Banking".
After graduation, Rajan joined the Booth School of Business at the University of Chicago. He
was then appointed as the youngest-ever Economic Counselor and Director of
Research (chief economist) at the International Monetary Fund (IMF) from October 2003 to
December 2006.
In 2003, he was also the inaugural recipient of the Fischer Black Prize awarded by the
American Finance Association for contributions to the theory and practice of finance by an
economist under age 4
Wealth of experience…!
In fact, Dr. Rajan is one among very few Indian economists who risked criticizing the
U.S.’s financial system at the prime of his career and warned against the potential
catastrophes. Having gained a wealth of experience and broad and analytic perspective on
how systems work, he came up with controversial papers chaffing the finance sector. After an
initial few brickbats, his views and implications on the flaws of the financial sector were later
noticed when he managed to prove himself as right.
Appreciate this. On why stimulus has failed, Dr. Rajan, in one of his columns said:
“Advanced countries will spend decades working off high public debt loads while their
central banks will have to unwind bloated balance sheets and back off from promises of
support that markets have come to rely on.’’
On the role of central banks, he said, in another write-up: “Quantitative easing has truly been
a step in the dark. Given all the uncertainty, why have central bankers, for whom ‘innovative’
is actually an epithet, departed from their usual conservatism in adopting it?’
Back home, on why India slowed down, Dr. Rajan said: “To revive growth in the short
run, India must improve supply, which means shifting from consumption to investment.
It must do so by creating new, transparent institutions and processes, which would limit
adverse political reaction.”
Key challenges for Raghuram Rajan…!
The immediate priority for the new governor will be to draft the mid-quarter review of
Reserve Bank of India's monetary policy on September 18 - within a fortnight of taking
charge. But the long-term challenges that Rajan has to address are:
2. Recovery of rupee...
Perhaps the biggest challenge for the new governor will be to strengthen the rupee which has
depreciated more than 12 per cent in the current financial year, and the drivers of the
weakness are not entirely in control of Indian policy makers.
5. Recouping FX reserves...
The foreign exchange reserves is at a three- year low and could cover imports for about six
and half months, lower than what is seen as providing stability to the currency.
Replenishing the forex kitty will be a key task.
“It’s a very tough time, we need someone who can give direction...the important thing is
giving leadership for the next five years on how should the Indian financial system move. I
think Rajan will be the best person to do that,” he said.
He is known throughout the world for his forthright and frank views.